Rinse and Repeat

This post may also be read at: http://www.cboeoptionshub.com/2016/05/17/rinse-and-repeat/

At my last writing on Monday, May 9th, my position was ten short SVXY puts for the March 13th expiration at the 54 strike, sold at $1.40 per contract, or $1,385.20 received.  My choices in disposing of the position (or allowing it to be disposed for me) was to either buy these puts back before Friday or allow the contracts to expire and accept assignment of shares at $54, should conditions dictate.

On Tuesday, May 10th at 9:40 AM, I noticed that SVXY opened above $56 and, not knowing what would happen later in the day, I took that early-morning opportunity to be the proverbial early bird, and I bought to close all ten puts for $0.55 per contract (please excuse any rounding of decimals), paying $564.77.  I considered this completed venture to represent a profit of $820 and I was happy with it, but not so happy that I didn't immediately sell more puts.

One minute later I sold ten puts at $1.11 each, also for the May 13th expiration but this time at the 56 strike.  For these I brought in $1,095.23. The scenario was identical:  Either buy back the puts at any time or allow them to expire and accept assignment of shares if contract buyers so desired, depending on share price anytime before, or more likely right at, the contract's end date.  This action on my part was simply a roll to a higher put strike.  (See illustration below for all of these transactions.)

The remainder of Tuesday was uneventful, but the next three weekdays saw my strike price crossed going up or down at least once per day in either direction.  In other words, it was run over and then run over in reverse and then run over again just for good measure.  On Friday, May 13th, SVXY touched a low point of 53.46.  I knew 56-strike put holders must have been whooping it up at the opportunity to sell their shares to me for $56 (their immediate gain / my immediate loss.)  I must have stopped watching it and resigned myself to getting expensive self-bought presents under the tree over the weekend or not; I'd wait and see.

Sure enough, on Saturday, some hardworking people [somewhere, not sure where] made sure that 1,000 shares of SVXY, having just been through the car wash and with the tires shined up to look new, got parked in my driveway while I was sleeping to greet me in the morning.  It turns out that I set about slapping a "for sale" sign on that mess of SVXY without wasting a moment.

My actions on Monday (May 16th) morning are regrettable to me now, but I'll explain them, anyway.  Interestingly, they closely resemble my actions of the previous Monday in which I immediately sold freshly-assigned shares and then wished I had not.  One difference is that this time, I had no associated covered call already in place to go with the shares.  I planned to put one in place first thing Monday morning, though, and I went against my own plan.  It would have been better to do that, so I'm making a mental note to myself to not throw my own strategy out the window so hastily.

What happened (see illustration above)  is that upon seeing a gap up and immediate rise in SVXY right after market open, I decided I'd do anything prudent to get rid of the shares.  I sold them for a price that, when netted against the put sale associated with the assignment, came out to $13 in my pocket.  It wasn't what I had set out to do, and sand was deposited in my swimsuit by the shovelful all day on Monday as SVXY rose, without stopping, to a late-afternoon peak of 57.16 ($2+ over the price at which I had bailed.).  I could have sold my stock for a nice profit of over $1,000 rather than taking a $1,000 loss as I did.  I also could have sold covered calls at the 56 strike (as was my plan, so that my shares would possibly be called away at the same price for which they had been put to me, and I'd bring in the premium, irrespective of the fate of my shares.)

The illustration above shows that the broker tactfully merged the short put and the sale of the resulting shares together instead of showing a gain and a loss. We could pretend nothing happened, but I knew I took my own work apart as soon as I had constructed it.  Moving on...

To get right back in the saddle instead of moping over my mistakes, I set about selling either a strangle or just a fresh set of puts for the May 20th expiration.  All day Monday I played "sub and snub."  That is, I submitted sell orders, and buyers snubbed them.  The standoff ended in a natural manner called End-of-Trading-Day, and I happily sold "better" (lower strike) puts on Tuesday (today, as I write) morning as such:  SVXY 55.50 puts for the May 20th expiration for $1.45 per contract.  Market conditions and sticking to my plan (which can change as market conditions change, but hopefully won't be discarded as quickly this time) will dictate the fate of these puts, and my next post will tell the adventurous or mundane tale.

A Walk Through the Maze

This post may also be read at: http://www.cboeoptionshub.com/2016/05/10/a-walk-through-the-maze/

Let's detail a story of the last two weeks, in which I stumbled through a maze in search of the reward at the other end.  I've made some wrong turns and backtracked a few times, but I think I smell the cheese ever stronger, ever closer to me, right around the next corner.

On April 28th I started with nothing but an idea, so I set it in motion as such:  With SVXY trading at $56.63 the moment I spied it, I sold ten SVXY 56 strike puts for the May 6th (six trading days away) expiration for $1.70 premium received on each.  All costs or amounts received take into account commission, so if you notice my figures not adding up by eight or fifteen dollars, rest assured I had to pay someone to move all this around for me.  The amount received for this transaction was $1,685.22.

Two minutes later I put through the order I already had worked up:  Ten calls sold at $1.40 each for the same expiration at the 57.50 strike.  The amount received for this transaction was: $1,385.22.

One trading day later, on Monday, May 2nd,  SVXY traded around $52.15 bright and early as the day got underway.  Call premium had really taken a hit, and I could not resist the prices being asked for 57.50 calls.  I decided to close out my short calls by buying them back for $0.19 each.

The closed transaction detail looked like this:

At this point I no longer had a short strangle; I only had short puts.   And expiration day quickly approached.  Over the course of the last five trading days of this contract's life, SVXY slipped below my put strike price of 56 and appeared to want to stay there.  The price to buy back the option was too high for me to stomach, so I planned for the eventuality of being assigned shares over the weekend.  Then, during the last trading minute of the contract's life, I sold to open ten calls to expire the following Friday, at the same strike as the price at which I would be assigned, for $1.50 per contract. My intention was to create, through the call sale and the assignment over the weekend, a set of covered calls.

The plan was a good one, but unfortunately I made what amounted to a bookkeeping error, and I'm still cringing.  I was, of course, assigned 1,000 shares of SVXY at $56 each, since that was the contract I wrote and I had to make good on it.  So on Monday morning (today, May 9th as I write this), I was the owner of those shares plus the short calls (now covered calls) for the 56 strike expiring on Friday, May 13th.

I envisioned my shares being easy-come, easy-go; put to me for $56 via a contract and called away from me for $56 via a contract (assuming share price would dictate that, of course), with premium collected by me on the buying and the selling side; elegant and engineered to be profitable.  Of course, the other possibility would be that I'd just continue to own the shares after expiration,  but either way I'd keep the entire premium received from what was, for one minute, a naked call but became a covered call over the weekend when I was assigned.  The proceeds from the call-writing were $1,485.20.


However, I must not have had enough coffee or something, because I didn't go over the math and I took my broker's bookkeeping on faith without comparing it to my own method.  I'm still not sure what happened; I tried to untangle it but ultimately decided that I'd rather just watch my own math more carefully the next time.  Before stretching this out into details that would give everyone hives, so let's shorten this portion of the story and say that I was under the impression that selling my shares would bring in a profit of high-several hundreds of dollars that I could use to offset (with profit leftover) the subsequent unprofitable closing of the short calls.  Instead of waiting one week for the short calls to expire and the shares to be called away, I set out to book what I thought would be a loss on the calls and a larger profit on the shares (refer back to a brain blip on my part wherein I didn't look closely enough at my cost basis in the shares and the profit/loss on liquidating them.) So I embarked on what I thought would be not a genius move, but a modestly-more-profitable three-part move.

In reality, what happened was that in a double whammy I bought the calls to close and booked a $330 loss, as such:

The big stinger, though, was that the $56,000 (gulp) worth of SVXY that I had blithely unloaded without fully opening my eyes yet that morning was sold at $54.34, and with my buying price of $56.00, that's what I consider a loss of $1,693.17.

To wrap up the mess above, it should be noted for the tally that the first figure mentioned in this post, $1,685.22 brought in for selling short puts, did offset the losses on the liquidation of the assigned shares (described in paragraph directly above) associated with that trade.  If the short puts, the share purchase and sale, and both sets of short calls are all taken together, it looks like I came out $843 ahead from the start on April 28th. 

On a different track now but not derailed, I went ahead and completed the next part of my plan, which was to sell SVXY puts now that I was freshly free of any shares and also of any covered or briefly-naked calls.

As of this writing on Monday afternoon, May 9th, I am short ten SVXY puts for the March 13th expiration at the 54 strike, sold at $1.40 per contract, or $1,385.22 received.  I can either buy these puts back before Friday or accept assignment of shares at $54.

No arrow illustrates the fate of the 56 strike puts which expired worthless on May 6th and resulted in assignment to me, but otherwise the option entry and exit points are shown below:

Shaking down the Shack

This post may also be read at: http://www.cboeoptionshub.com/2016/04/27/shaking-down-the-shack/

A trading friend of mine, who wishes to be called "Chip" in the telling of this story, is clamoring for me to tell this story on his behalf.  The brief but detailed saga is basically a chronicle of Chip's studious, calculated transactions that allowed him to benefit from a particular company's stock price trajectory over the one week span of time covered by this case study. It's a tale of Shake Shack, puts and calls, and of cash raked over the barrelhead into Chip's sweaty, eager hands.

On April 15th, noticing that Shake Shack had been trading four cents shy of $39 during the morning and was somewhat above $38 in the afternoon, Chip scouted out attractive puts to sell. With cash set aside to secure them, he submitted a limit order for $1.10 for the 38.50 strike puts expiring one week away, on April 22nd. His reasoning was that he believed SHAK's price would top $38.50 by the 22nd, despite possible interim moves lower. He was willing to be assigned stock if incorrect in this prediction.  His order was filled at $1.13.

He now held ten short put contracts for SHAK at the 38.50 strike, April 22 expiration, for $1.13 premium each.

Interestingly, two trading days later, on Tuesday the 19th, SHAK touched an intraday low of $35.59.  Chip's puts would have been expensive to buy back.  He did no such thing, however; to the contrary, while SHAK hovered just under $36 that morning, Chip bought five calls at the 36 strike for $0.85 each.

The next day, April 20th, the premium for those calls decreased, despite a slight rise in share price for SHAK.  Chip bought five more of the same for $0.80 each.

He now held ten short puts expiring in just two days for the 38.50 strike and ten long calls also expiring in two days for the 36 strike.  SHAK's trading range for April 20th was 36.10 - 37.54.

On this same day, April 20th, after having loaded up on long calls for 36 strike SHAK at a cost to him of $825 total (including those purchased the day before), which had the potential to become a total loss to him in two days, Chip assessed the health of this position.  With his second purchase having been made during the first hour of the trading day, the last hour approached and call prices had risen significantly.  In mid-afternoon, when SHAK prices hovered around 37.50, more or less, Chip liquidated all ten of his long 36 strike calls for $1.30 each.  This brought him a profit of $429.50, after broker commissions, for just one day of monkeying around and shaking up the shack a little bit.  See summary below:

On Thursday, April 21st, only one day remained in the life of Chip's short puts.  See chart above for refresher:  He had sold ten puts short for the April 22nd expiration, 38.50 strike, for $1.13 premium received.   SHAK's trading range on this day was $36.76 - $37.70.   Chip knew that if SHAK ended below $38.50 by the end of the next trading day, he was likely to be assigned 1,000 shares of SHAK, and in fact, he could be assigned those shares at any point prior.  He was willing to own those shares, because he believed SHAK share prices would rise in the long run, and he was comfortable owning the shares.  But his intention was to avoid taking on shares if possible, and instead to profit from the movement in option prices over short periods of time.

Around midday on Thursday the 21st, one day before expiration, Chip rolled his short puts by doing the following:  (see chart below for detail)  He bought to close all ten of the above-described 38.50 puts for $1.30 premium each,  which was a price higher than what he had opened the short puts for, so he took a loss on this transaction.  The loss was $201 after accounting for commissions.  Then he opened up new short puts as such:

With a date one week farther out but everything else being identical, he replaced the set of short puts by selling ten SHAK puts expiring April 29th at the 38.50 strike for $1.73 premium received per contract.  On the next day, April 22nd, Chip noticed SHAK stock prices rising (see chart again) so that traders weren't hot on the trail of SHAK puts, and premiums softened accordingly.  When  his week-away puts sported $1.40 price tags - cheap relative to the price he had received - Chip took the opportunity and bought the contracts back to close for a profit.  His profit on these rolled contracts paid him back for the loss he had taken on the puts closed the day before, with some extra bonus profit.  While his loss had been $201 on the previous set of puts, he made a gain of $299 plus some cents (all figures after commission) on the new transaction, and netted together, that made for about $99 in profit from his put-selling and buying-back venture.

This chart zooms in on the last two days shown in the previous chart

Total figures on the short put project are summarized as such:

All told, he made over $500 and never owned any SHAK stock at any point during the put-and-call shuffle. Chip's trades demonstrate that both long and short options can generate profits when traded with attention to daily price fluctuations and an eye on the underlying's price.

The Iceman Selleth

This post may also be read at: http://www.cboeoptionshub.com/2016/02/23/19782/

Sometimes it's worth letting something simmer on the stove a while to get impressive results, or in this case it's more like letting something ferment in earthenware pots buried in a forgotten location. But the feast five months later is worth the wait and the worry!

Back in September I asked an offhand question of my fellow trader, @Option_Iceman, and received no offhand reply; I quickly forgot about the matter and didn't revisit it again until an answer emerged just a few days ago. The curiosity was momentary; my interest in @Option_Iceman's trade vanished as quickly and surely as would a demanded recollection of what I ate for breakfast on some random day within the last year (actually, I could place a safe bet on that answer since I seem to eat the same thing daily. Uh-oh... boring personality alert!)

To jump right into the middle of the story, note in the below tweet-conversation the five months that elapsed with no answer, during which I excised @Options_Iceman from my list of civil and courteous close friends with whom I share exciting, lucrative wealth-building ideas back and forth like a crew of bandits and outlaws generating the most money anyone can legally... Wait, not really; I simply forgot about the question and went on with my same-breakfast-daily life, not knowing that @Options_Iceman was the one making money while everyone else just gnashed teeth on their daily granola bars, watching the market's red cascade daily and thinking about how we could have made money, but didn't make the right moves at the right time.

Well, here's what @Options_Iceman did to show us all up:



Let's start by looking at what SVXY has been up to for the last nine months:



As pictured below, during one fine day in September, @Option_Iceman saw that even after SVXY's August crash, someone was willing to pay $4.10 at the very top of the call chain, which happened to be 140 strike calls at the time. He sold those calls, told the world about it, ignored my question, and then hunkered down to wait.

Green grass yielded to autumn-colored leaves, then snow blanketed the land; winter solstice plunged us into dark mornings and afternoons peering at flickering red numbers, hands cupped around hot mugs of coffee, crunching our daily granola bars; no one gave a thought to @Options_Iceman and his strategy (unless you paid better attention than I did, in which case you'd see that he sold other calls and puts like the aforementioned bandit all fall and winter. He obviously makes money the way the rest of us just make cups of coffee and peanut butter sandwiches.)

Another look at SVXY, this time with the entry and exit points for @Option_Iceman's short call finagle:



But enough of the SVXY share chart. Let's look at the chart showing options prices that traded for his selection, which was the January 2017 140 strike calls. @Option_Iceman got in while the gettin' was good, obviously, since he took $4.10 of someone's hard-earned money and only had to repay 5 cents to the poor schlub.



The only thing @Option_Iceman could have done to be Impossible Genius of the Year would have been to sell those calls at their highest historical price. That is to to say, right around the tippy-top of SVXY's wingding of a YTD party, its culmination of non-stop buyer-profit revelry going on six-months strong, which is another way to describe mid-August of 2015. Someone was writing those contracts for eighteen dollars and I wonder what kind of robots those people are. Is anyone smiling about this, somewhere, or has someone's heart and brain been replaced with circuits? Or were those contracts traded out of the next day, all the way down the slip-and-slide? Questions I don't have answers to, but I ponder between one cup of coffee and the next. See interesting call price chart for the January 2017 SVXY 140 strike call below:



Those calls now [as of Feb. 22] trade at 25 cents each, which is a significant difference from @Option_Iceman's bargain 5-cent buy-out price. It's especially significant since the contract still has nearly a year to run and with fluctuations in SVXY's price, anything goes. So, even though he didn't scrape every morsel off the $18 drumstick (did anyone?), no one can fault him for spending a nickel to make four dollars, a fine options-trading move by anyone's standards.

Keeping my end of the put-selling deal

This post may also be read at: http://www.cboeoptionshub.com/2015/11/29/keeping-my-end-of-the-put-selling-deal/

Let's follow up on a strategy started on August 25th, which is a day that can be labeled by any one of a number of epithets, as it was the day Mr. Market fell off his barstool.  Actually, August 24th was the day he clawed and struggled all the way down, and the 25th was the day he really went "thud" on the floor.

In this linked post from early October, I detailed some sold puts that got assigned to me; soon after, I disposed of 100 of the 300 resulting shares and kept 200.  The cost basis after accounting for the premium received was $53.61 per share on SVXY purchased at the contracted-for price of $57.50 on the expiration date of August 28th.  The premium I received, as you can deduce from observing the discrepancy between contracted strike and cost basis, served as a down payment on shares, and since SVXY closed that day (the contract expiration date of August 28th) at $52.12 (and traded as high as $53.78 during the day), purchasing SVXY at a cost of $53.61 didn't seem like too bad of an outcome at the time.  In fact, as I boasted within the above-linked post, SVXY was $60.85 at the time the post was written (approximately one month after assignment), which gave me a nice unbooked gain on those shares.  It's written in the post, but you can do the math in your head right now:  $7+ per share gain times 200 shares equals more than $1,400 in profit just sitting there ripe for the picking.  In fact, SVXY tried to touch $65 in October.  Did I take the whopping profit?  At any point when SVXY was in the sixties?

You know I'd be posting some tables and charts here, if I did, but I didn't.  Here's what I did next:  As shown in the next post from mid-October, I continued the same strategy of selling naked puts (actually it was singular - just one put) on SVXY, risking that I'd have additional shares put to me (unless I would trade out of the contract first, and it turns out that I did not trade out of the contract first.)  To be more detailed, though, as described in the post, I liked thinking of it as a short strangle, but really it was a covered call and a naked put.  To be precise, I already had more than enough shares to secure the call, and that changes the character of the call.  The put is then out on its own, not part of a set anymore, but something of a spare part; possibly a little unglamorous and undignified as the descriptor "naked" connotes.  At the end of the post, I noted that I didn't plan to buy back the contracts, and I described briefly the three possible outcomes for that "short strangle sandwich" as I like to think of it.  The strategy I had in mind based on the three possible outcomes is as such:

1. Of course I could have just collected the premium for both the call and the put as an uncomplicated end to the whole story, had SVXY stayed between the two strikes of 60 and 66 through November 20th.  (This did not happen.)

2. I could have just had 100 shares of SVXY put to me (which is what actually happened) along with keeping the premium received from the put, and kept all of the premium from the call with no further obligation on that side (I kept only a very small portion of the premium from the call because I bought it back, when in retrospect, I wish I hadn't.)

 

3. I could have had 100 of my 1,000 (at the time) shares of SVXY called away from me along with keeping the premium from the call, and kept all of the premium from the put with no further obligation on that side (which is not what happened, since SVXY ended lower than the $60 put strike on expiration day.)

One thing I did not want was to have any of my shares called away from me, although of course that is a valid strategy and a possible outcome when selling what really amounted to covered calls.  I wasn't swayed by the idea that I could book a gain (by selecting a parcel of shares that I had bought at a lower price than the call strike and recording that as the one I handed over to the call buyer); I simply wanted to keep my shares.  So on October 23rd, when SVXY topped $64 and VIX wore 13.24 and looked like it might try on 12.00 for size, I got nervous and bought the call back in order to protect what I saw as a precious collection of short-volatility cash-producers.  I wasn't really thinking about how low the VIX was or how fast SVXY climbed compared to recent history and expected trajectory (I noticed it -I'm not unobservant); I wasn't thinking about anything but the way SVXY can march straight up and leave you, crying, behind, and I didn't want to subject myself to that vicious treatment for a lousy couple of hundred dollars as consolation prize.  Then I sat tight even when volatility took a hike back up the mountain and SVXY went on an extended lunch break; I accumulated more shares on November 20th for a total of 1,100 shares of SVXY back from lunch and "at work" (hopefully) now.

As of sometime this afternoon (November 23rd)

So, to compare the scenario from my post of early October with the scenario now, and to mention what happened in between, a summary could be made as follows:  In late August I added to an existing collection of SVXY at a cost basis of $53.61 per share.  I did not liquidate any SVXY shares when prices as high as $64+ were reached 1.5 months later, but I did sell more puts (and an ineffectively traded short call) at that time, and ended up taking assignment of more SVXY at a cost basis of $56.49.  Since the great majority, but not all, of the SVXY shares I hold were bought at prices higher than either of those, I reduced my overall cost basis slightly with the first assignment and then again with the second assignment.  I also have a greater number of shares now, so that any rise in SVXY will power a greater overall profit potential for my account.  Whenever desired, I can to write any number (up to eleven) of calls against my shares without taking on the liability of naked calls.  I may have missed the boat by not cashing in any SVXY shares when $65 was visible on the shoreline, but if I see it again, I'll have a bigger boat this time.

How Cheese is Made (Alternate Title: Put the Short Premium in the Bag)

This post may also be read at http://www.cboeoptionshub.com/2015/11/02/put-the-short-premium-in-the-bag/

The tale of October happens to be the tale of my friend, "Mr. G," and what he did to turn $39,727.47 on September 30th into $56,239.25 on October 31st.  How's that for some trick-or-treat plunder?

Here is the breakdown, separated by types of trades, of which there were only a few.  I'll number the types and show the dates and entry and exit points.

1. The greatest number of trades were made by selling short shares of TVIX on different dates between September 22nd and October 23rd, and buying them back on different dates between October 5th and October 28th. 

Between September 22nd and October 28th, TVIX declined by 47%, from $11.11 to $5.92.  Had Mr. G simply sold short approximately 419 shares, which would be about -$4,653 worth of TVIX on September 22nd and bought those back on October 28th for $2,480, he would have been able to realize the same gain:  $2,173.  Most likely the brokerage is happy with his trading habits.  Instead of making those two transactions, he traded with a frequency comfortable to him,  based on risks he decided to take at the time and with larger and smaller amounts from day to day.  Also, he put more or less into this mostly-ongoing short TVIX position based on availability of funds in his account surrounding other trades which he considered more important at most times.

2. A trade parallel to this one was some UVXY shares sold short and then bought back to close, which was soon replaced by another lucrative trade.

As you can see, on October 5th Mr. G sold 200 shares of UVXY short at around $46.28.  The very next day, he bought those shares back for $42.73 and made a profit of $699.35.  Here's what's interesting:  He closed the short at 10:06AM on October 6th.  Now, according to Mr. G, he must have had four cups of coffee that morning, because during, between, and while taking care of that trade, he went and did the following:

At 9:47 AM, before closing the short shares, he believed that the sharp overnight drop in UVXY would be followed by a bounce (as pictured in the chart, he turned out to be right) so he sold two puts that were deep in the money.  Less than one hour later, when those puts were less deep in the money, he bought them back for a tidy gain of $167.  (See below for details.) In the interim, of course, while watching his under-one-hour-dry-cleaning maneuver otherwise known as taking put buyers to the cleaners, he closed the short shares from the day before and moved on to his next method of turning volality into dollah-tility.

3. (category three of Mr. G's trades which is the above-mentioned limited foray into the short-selling of UVXY puts.  Think about the layers of inversity there for a moment.  Selling puts on a leveraged ETF that purchases futures contracts on the VIX, which... Never mind, shaking head and moving on now.)

4. The largest amount of profit in Mr. G's account during October was made by selling shares of SVXY he bought at various points during September and October.
 

He ran 887 shares of SVXY through the washing machine and found $10,049 in the dryer which represents a gain of 23% (he bought $44,364.30 worth of stock, sold the same stock for $54,413.43.)  That's a lot of extra socks in the dryer that came from who-knows-where.  Actually, it's known where they came from:  The S&P went up by 6% between September 10th and October 23rd, and the VIX decreased by 45% during that same time period, and Mr. G sought to participate in the stability-building in the market by buying SVXY low and selling it high.  In addition to shares, he also dealt in calls as such:

5. Bought the December 45 and 50 strike calls for something in the neighborhood of $8.50 and sold them later for something in the zip code of $11; he had ten honking contracts so this was something under $2,500 in extra wallet-stuffings by the time all was said and done.

6. Sold some calls on SVXY and bought them back for a punishing price soon after, which was the only significant money-loser Mr. G experienced this month.  That's another story for another day which will never come, because the story cannot be told (in this venue.)  Sold some puts on SVXY and bought them back for nearly flat; sold some others and let them expire worthless so that a tidy profit was realized on a two-day trade.

The month ended with only the expiring options to be settled (for full profit to Mr. G and a total loss to the put holder) over the weekend, and a fresh, clean slate of working capital with which to generate more returns in November.  Thanks for following along with "guest blogger by proxy," Mr. G, who gave permission for his adventures and misadventures to be documented for entertainment and maybe even 15 minutes of fame.

Closing a volatility short and writing an inverse volatility strangle instead

This post may also be read at www.cboeoptionshub.com/2015/10/19/closing-a-volatility-short-selling-an-inverse-volatility-strangle

Let's check back on the progress of a trade last mentioned two posts ago.  This could be described as one of my favorite games ever, formally called "shorting the ultra-long volatility."  I've dabbled in both TVIX and UVXY recently, and the October 6th post illustrated some meat carved off the bone from the eleven-ish level on TVIX down to $9.48, when I just could not resist taking a bite.  To the tune of $651.

Never one to be happy with a clean plate, I loaded the plate again, as alluded to in that post as such: "jumped back in less than one hour later" ... "and sold some UVXY short at $43.79."  I also mentioned that I might have to sit through some adversity with the position, but I didn't really believe it was likely; I was trying to minimize cockiness and also preemptively save face, in the event I might be wrong.  Six trading days later, I bought the short shares back for $38.59, and it was not necessarily to "call bottom" on a move, but rather, to take a short breather and convert the chips back to TVIX.  Why would I do this?

Well, originally, I got the clean hundred of UVXY short shares with the intent of selling one put against it.  But, due to pathological cheapness, I could not bring myself to do it.  Said another way, I didn't think the premium I'd be able to collect at the time would be worth offsetting the potential gains I'd make with UVXY short shares.  Take a look at the activity during the days I held this to see how difficult it was to pick a plausible UVXY bottom:
 

As you can see, I tried all day on Thursday the 8th, but basically sat back in awe of the ever-dropping share price, each minute happier than the minute before that I had not tried to be a wise guy and set a floor on this rolling boulder.  On the 14th, realizing that if I had not sold a put yet, I would probably never do it, I bought the UVXY shares back and then used most of the proceeds to add to an existing TVIX short position I had started to build up on October 7th, 8th, and 12th right after writing my "Book It While It's Hot" blog entry (because apparently I like cooking more than I like booking, so I secretly started a pot boiling as soon as all of you had left the room.)

This brings us all the way to today, where I closed out the varied and sundry lots of TVIX accumulated recently and took a nice profit, but felt immediately afterward like a person who just ate the last piece of cake.  How does such a person feel?  Wondering where their next piece of cake is going to come from - that's how!  Here's the cake, sliced up:

Now I'm in need of something to do if I'm going to stay out of trouble.  I looked over the SVXY options chains this morning when SVXY was trading at around $63.00.  They looked like this:

Here's what I did:  I sold just one call for SVXY expiring on November 20th, 2015 at the 66 strike for $3.17, and I sold one SVXY put for the same expiration at the 60 strike for $3.60.  I have more than 100 shares of SVXY, which makes this what I call a "strangle sandwich" (a short strangle with shares in the middle) but what the brokerage labels a covered call and a naked put.  Here is what a section of my portfolio looked like soon after initiating these positions:

This post is already long, so I'll save the exact profit/loss calculations for the various outcomes and go into them next time.  But the outcomes will run something like this, assuming that I won't buy back the contracts (and I don't plan to):

Keeping the premium received from both legs or
Having 100 shares of SVXY put to me and keeping the premium from both legs or
Having 100 shares of SVXY called away from me and keeping the premium from both legs.  We will see next time which, if any of these outcomes, is looking particularly likely over the other ones, and calculate what might happen regarding additional share purchases or sales connected to these contracts.  I will also go into my motivation for assembling this simple structure of bookend-like contracts.

Option assignment is not always bad

This post may also be read at: http://www.cboeoptionshub.com/2015/10/13/option-assignment-is-not-always-bad/

If anyone remembers (and even if you don't), back in early September I griped a little about my booked gains/losses for the month of August not showing the premium I received for puts I wrote which were then assigned.  The brokerage incorporates the premium received into the cost basis for the shares upon assignment.  I may not have liked that then, but I sure do like it now.  See illustration below on the transactions and the outcome in my account as of today:

That's the transaction detail showing the $1,165.95 I received for the puts; my gain/loss sheet for the month showed only the notation "OA" (for option assignment) and no dollar amount credited.  Instead, my current holdings show the cost basis being lower than $57.50, as such:

First of all, let's address the missing shares. You can see that I wrote three puts, but there are only 200 shares shown in my portfolio.  I sold 100 shares of SVXY at some point in the interim.  If you want to be detailed about it, well - I sold more than 100 shares from several different basis prices, but let's zoom in on the way the brokerage recorded it (and I was the one who set the LIFO or FIFO, so who really cares, right?) but I did, in fact, sell 100 shares on September 4th for some noble purpose that may not have panned out as profitable, but here is the ugliness, anyway:

So, to recap and refine this story in text format, with the above graphics as visual aids, on August 28th I fell victim to my own put-writing by being assigned 300 shares of SVXY at the contracted price of $57.50.  The brokerage left my gain/loss detail for the month looking unimpressive (even more unimpressive than it already was) by recording the gain/loss as a zero for that transaction and instead logging a nicer price for the shares I was forced to buy.  Instead of $57.50, they were recorded as $53.61 per share to purchase.

Then on September 4th I got the wild idea to take a loss on 100 of those shares to enable some cockamamie scheme (actually it was for the purchase of in-the-money calls - see my blog entries from September 16th and October 3rd - and those calls did end up being sold for a profit.  It looks I got my loss back and tacked $300 on with that venture.)

As of today, the remaining 200 shares of SVXY sit in my account with the price paid noted as 53.61 and the price as of this writing being 60.85 for an unbooked gain of $1,434.61.

The gain I initially realized from the put writing went straight into buying the shares, but an attractive-looking purchase price was recorded.  I lost $743 when selling 100 of those assigned shares, but did make a comparable (plus bonus) profit on a side swindle with the liquidated cash.  And my 200 remaining shares could be sold right now for a $1,434.61 profit.  So being assigned is not always the disaster it is sometimes thought to be.  I used the words "down in the dumps" in September when describing my share holdings, but now I have no complaints.

Book it while it's hot

This post may also be read at: http://www.cboeoptionshub.com/2015/10/06/book-it-while-its-hot/

When we last left off, I wrote in detail about the long calls I bought for SVXY.  I still have those, and the update is that while they traded for only $4.64 each at the time last mentioned (versus my $8.50 buying price), the bid/ask on those has risen to $7.00/$8.30 as of this writing, with the last trade recorded at $7.49.  I keep under consideration the idea (translated: I can't wait) of getting out of these calls as soon as I can do so for even money.  All right; it's not really true that I'm chomping to get out of them. I would have to assess conditions at the time.  My intention is to amplify returns that I would expect to make on a particular number of SVXY shares.  I might make money on neither, though, with the shares simply turning into slimmer versions of their former selves (which allows me to retain some value and some hope for future gain - slim livestock can always fatten up) and the calls turning into dust.  That is the risk I took by buying calls.  I will evaluate the risk every day until I get rid of the menacing things.  I have until January, but dollars and time do not always equate in the way we would like, and I'm not crazy about holding a potentially depreciating asset.  This is the extended-mix way to say I am nervous owning long calls.

I will now revisit a topic too tangential to get into in the last post.  I said, "I did something else with the rest of the proceeds" of some liquidated SVXY shares.  Hmm... I could compare the loss I took on those liquidated shares and see how it lines up with the gain I booked on the following.  But I'm not going to do it, mostly because I bought and sold so many small lots of SVXY during the last several months that it would be meaningless to single out one lot and differentiate it from another.  After all, it is up to me to set "FIFO" (first in, first out) or "LIFO" (last in, first out) when I liquidate shares, and I was not even paying attention to that.  I don't really care whether my booked gains and losses look pretty; I expect them to even out in the end with real dollars and not just beautiful ledger entries.

So anyway, on September 18th and 28th I sold some shares of TVIX short.  See detail.  It was 360 shares altogether for an average entry of about $11.31.  Today I bought all of those back to close the trade at $9.48 for a profit of $651.

A visual representation, showing the start of TVIX down the side of the mountain, is below:

Then, never content to consider a trade done and over with, I jumped back in less than one hour later (grabbing a little bit of benefit from momentary float upward in TVIX/UVXY) and sold some UVXY short at $43.79.  (By "momentary float upward" I mean that I sold UVXY short at a higher comparative-to-TVIX price than the point at which I had exited the TVIX short.) I may have to sit through some adversity on this, as I did with the TVIX trade.   My purpose in this was chiefly to convert my TVIX short to a UVXY short, with the possibility open that I can sell covered puts against this position if an attractive opportunity presents itself.

I'm way out on the ice

This post may also be read at: http://www.cboeoptionshub.com/2015/10/02/im-way-out-on-the-ice/

Let me get right down to numbers, since there will be a lot of numbers amongst the words.

In the last post I detailed a bunch of long calls, and an update on those is overdue.  In review:  I had allocated a large (to me) (when it is a risky proposition) amount of money toward seven of the December SVXY calls at the 40 strike, paying about $12.30 each for them (translated to real cost:  $1,230.00 each or $8,610 in total - I'm rounding and ignoring commissions here) when SVXY was about 47.

Just about a week later, I sold them for a modest (but not nearly what I had set out to make) profit and later replaced them with different calls.  Here depicts the disposition of the original calls:

 
SVXY was in the 50+ range on September 15th, and I got scared out and sold the contracts. This was one of my more painful misses.  Later that day and over the next few days, SVXY ripped up to 62.  I recall being in a very bad mood over these particular days.  At least I got a small profit, but I didn't open the trade to make just a small profit.  I had loftier goals in mind.  I shouldn't have done this, but I computed what I would have made (a mentally ill trading behavior) had I held for a few more days, and I don't want to talk about it.  I'm trying to block it out of my mind.

I will not type here how much I might have made. Believe me, I calculated it and made myself sick.  On the other hand, had I been the one to dump these options this afternoon at $9.90, I would have lost $2.40 per contract, or $1,680, so I'll be glad for the similar profit I booked instead.  Moving out of the world of "what could have happened" and back into "what actually did happen," let's continue.

On the 16th, in the throes of the above-mentioned bad mood, I took the proceeds gleaned from the long option closing and bought 240 shares of SVXY at the price of $56.44 per share.  This looked like an ace move for about one day while SVXY shot up to nearly 63.  After it didn't look so ace anymore, on the 18th and 21st, I sold 140 of those shares for the average price of 52.77, booking red ink in the amount of $535  (thus the reference to persistent bad moods.)  I didn't do it because I thought the purchase had been a mistake - in fact, I'm loathe to book any loss and it was like pulling out splinters to do it, but I did it to raise cash for the below:

With $535 loss in hand, I set out to do "long calls, part II."  On September 21st, with SVXY trading for $53-ish still, I decided to change my risky bet... ahem, I mean, long call strategy just a little this time around. In the previous incarnation, I had kept 800 shares of SVXY and added seven long calls on as a sidecar.  This time I kept 900 shares (remember how I bought 240 shares, bringing my total up to 1,040, and then liquidated 140?  So I had 100 more remaining in the account this time.)  The other changes were:  Fewer calls, a higher strike, a farther-out expiration, and less premium paid (because of the strike being higher and the expiration farther into the future.)

On September 21st I bought six of the SVXY $55 calls (this time a few dollars out-of-the-money instead of in-the-money as previously done) for $8.50 each, expiring January 15th.  The total cost was about $5,100.  At expiration, SVXY will have to rise to at least $63.50 just to get my money back out of these.  By contrast, had I simply held the stock (which I sold for $52.77, so let's use that as a comparison point)  I could have 96 shares of SVXY instead of the expensive out-of-the-money calls I bought.   I'm comparing 96 shares, not 140, to the long calls, because I did something else (another story for another day) with the rest of the proceeds of the 140 shares, and 96 shares at 52.77 equals $5,066, which is essentially the same total as the purchase price of the abovementioned options.  96 shares would appreciate by $1,030 on the climb from $52.77 to the hoped-for $63.50, and by comparison, SVXY at 63.50 would bring me merely to flat with the calls I saddled myself with now.

Above the expiration day price of about $65.50, I'd start to make more profit by holding the calls vs. the alternate reality world where I might have opted not to do this maneuver and just kept shares instead.  Let's dream big for a minute and fantasize about SVXY being $80 on January 15th.  (I lie awake at night thinking about these things.)  I would stand to make $2,614 on the 96 shares (which I don't have anymore) but I could sell the calls on expiration day for about $25 each, which is a total sale price of $15,000, with my cost being $5,100 (remember, I paid $8.50 each), for a profit of $9,900.  This is why I bought calls:  To try to bring in more profit from the sale of the calls than I would on simply holding appreciating shares.

As of this writing (September 29th), those calls have most recently traded for $4.64, which is 45% lower than my purchase price, and the shares most recently traded for 45.68 (after hours), which is 13% lower than the comparison price of $52.77.  Good thing I'm not booking anything today, but the shares never expire, and the options expire in January, so I'm on thin ice. We'll see if the ice thickens up by mid-winter.

I don't usually trade long options, but when I do...

This post may also be read at: http://www.cboeoptionshub.com/2015/09/16/i-dont-usually-trade-long-options-but-when-i-do/

Who buys calls?  Who buys puts?  I often wonder this, as I am usually the one selling them to others.  Do buyers really think they're going to profit from them?  Is a real person buying them?  Is it a bank, or a "market maker" (they are people, right?  I admit I'm confused about those mythical creatures.)

Anyway, it's a rare happenstance that I think a call or put is worth buying.  One thing that makes an option attractive to me is its structure of being deep in the money.  That way, unless the stock moves opposite the direction I'm thinking it will, I'm mostly just paying for what has already happened.  It's a little like buying stock.  I'm paying for the intrinsic value, and what could be more fair than that? (Beyond just buying stock, of course.)  Anything above the intrinsic is a risk I'm taking (actually, the intrinsic is a risk, too, and it's more of a risk than simply buying stock, which is also a risk, but we're talking about gradations of risk, here.)  So, here is what I did and why I did it:

I had 200 shares of SVXY.  Actually I had many more, and still have them, but I selected 200 prime cuts of fine flank SVXY and wrapped it up for sale.  $9,250.77 later, I went shopping in the aisles of the supermarket called "Options Chains" and rang up some expensive purchases.  At first I got into October but later traded out; those details aren't important to this story (no, wait!  Details are important as I made a small profit doing that).  The profit was negligible in the grand scheme of things, so let me get to the conclusion of this story.

Of course, the story is not over and will not be until as late as December.  Here's what has happened so far, though:

I replaced 200 shares' worth of SVXY (trading at $46.29 on the day I liquidated them) with 7 calls for SVXY $40 strike at the December 18th expiration, paying $12.30 for each option.  That's $8,610 worth of betting that SVXY will be at least $52.10 by expiration.  This assumes that if SVXY is trading at $52 on the day of expiration, $40 calls would be worth $12.00, or about what I paid.

In the meantime, though, SVXY is not approaching $52; it's still about $47 as of this writing (remember, it was about dollar lower when I "converted" shares to calls), and right now the calls are fetching about $13.00.  I could sell right now and get a few dollars in profit.

My hope, however, is that hanging onto the calls will allow me to benefit from the rise in share price more than I would have, had I simply held onto the 200 shares.  Example scenario:  Near expiration, SVXY may trade at something like (this is a hypothetical number) $62.  This is a full ten dollars over the price needed for me to break even on my calls.  In this example, the $40 calls would be trading for $22 each.  Remember, I only paid about $12 each for them.  Let's compare my benefit on the calls vs. simply holding the stock, with no calls bought:

Calls bought in September for $12.30 each, 7 of them:  Purchase price $8,610.  Sale price near expiration:  $15,400, which represents a gain of $6,790.

Shares held from September (at the price and date I executed this little plan) through the date the calls I would not have bought would expire:  200 times $46.29 = $9,250.77 and the fantasy price quoted above on expiration date of $62 times 200 = $12,400 which represents a gain of $3,149.23.  You can see that the calls would net about twice as much profit as just the shares would.

Note that I did not use all of the cash generated from the sale of shares to purchase calls; I still had some left over, but I did not include that in the comparison.

What I've basically done is attempted to use the gain I had previously hoped to get from my former lot of 200 shares of stock and increase the profit, above a certain price point in SVXY, to the gain I'd get from having 500 additional shares of stock (700 total)  instead of just 200, with some premium paid for the privilege, of course.  At a share price of about $54.70, I'd start to make more from the options versus just holding the shares and saving myself the stress and risk.  Of course I'm hoping for an all-out party in which the calculations break the calculator.  But before that happens, let's just hope I'm not holding a pile of public-restroom paper towels for which I paid enough money that I could have bought a serviceable used car instead.

Wrap-up of an unprofitable month

August, in my estimation, could have been worse for my account. I say that because, although the total was negative in terms of actual account performance (which is calculated by taking the value of stock holdings on a given day, like the last day of the month, and accounting for booked gains and losses), I am more concerned with booked gains and losses than I am in value of holdings. Why? Because I wouldn't be holding my holdings if I didn't expect them to bring my account value up eventually, for one thing. For another thing, the purpose of my account is to be able to withdraw cash from it on a regular basis, that cash being generated from my booked gains (more so than by booked losses - those aren't great for building up cash.  And my "account value" is not important to me, as long as I have something with which to make something, and keep my ATM running smoothly.)

While I did book more losses than gains during August, due only to ONE unfortunately run-over position (I take the blame, just like I take the credit when things go right - it cuts both ways - it's never "The Market" helping nor hurting me, although to be fair, it really is, in both cases), things could have been a lot worse. The horror story was detailed two posts back, so let's not go over it again. It's healthy to move on and live in the present.

I do want to add something to my record of booked gains and losses for the month of August, and that is the cash generated by the sold puts that resulted in shares being assigned to me. If the shares are going to be part of my family, you can bet that I'm not going to just throw away the money that came in as a stipend toward the care and maintenance of those new cars in the driveway. The brokerage seems to like to calculate cost basis by taking the premium received and setting it against the cost to purchase the put-to shares, but I like to keep things more honest: The stock cost a certain amount - let's just call the purchase price what it is - and I got a certain amount of cash in the account as compensation for my time and trouble; they are two different types of currency, in my mind.

Let's append with the following:

So, officially, my booked gains/losses for August were -$3,060 , but since I like to take the cash received into account, I consider the booked gains/losses more realistically to be -$1,156.11 . Either way, I am sitting on stock that cost way more than the current market value, putting my "account value" and "account performance" down in the dumps month-over-month. Even taking the current value of my put-upon stocks into the big picture and calculating YTD gain/loss as I do every month, I am up well over 50% YTD (fluctuating a few points day by day); how is "the market" doing YTD?

Easy trading before the hurricane came through

This post may also be read at: http://www.cboeoptionshub.com/2015/08/31/easy-trading-before-the-hurricane-came-through/

As someone pointed out two posts back, I did tell everyone: "Follow along for a less wordy (because I've already explained it all) installation documenting the conclusion to this story pretty soon, as the story must end before the dates stamped on my only two current positions: Friday the 21st."

So here it is, minus lots of words, because there's not a ton to say other than when I opened, when I closed, and the prices (and the way I dodged being assigned a lot of shares at the associated strikes.)

A picture is worth a thousand words, but here are few on top of that, anyway:  On August 11th, with SVXY in the low 90s, and on August 12th, with SVXY in the mid 80s, I wrote puts for the 85 strike and the 77.50 strike (respectively), both to expire on August 21st.

On August 19th, feeling that anything could happen between then and Friday (good one, huh?) I bought back all, thinking I was being overly conservative on the 77.50s, but doing it anyway, just to raise cash, and because eight cents seemed like a fair price to get out of harm's way.

The funny thing is that Friday ended with both of those strikes cut through like a red hot surgical scalpel through butter.  Even the 77.50s would have been assigned, had I sat there watching the market like a slacker watching TV.  This is not to say I didn't get into more trouble later (I'm expecting a Santa sack full of early Christmas presents this week), but this is the story of last week.

I ended the week $918 richer (see above.)  Simple trade; not very challenging to monitor under stable market conditions; almost boring enough to fall asleep to.  If only every trade could be so easy, right?

In which I get a black eye, but escape a worse black eye

This post may also be read at:  http://www.cboeoptionshub.com/2015/08/25/trade-in-which-i-get-a-black-eye-but-escape-a-worse-black-eye/

It was a black eye I gave myself, of course.  If this blog were all sunshine and lollipops - well, that would be great.  I'll work on it.  For now, it's not happening.

So last week I got it into my head to sell some UVXY 55 calls, thinking that strike was unlikely to hit.  Under "normal" market conditions, that would be a reasonable belief.  As everyone and their kid's kindergarten teacher knows by now, the market has had a "correction."  I got sent to the house of corrections along with the market.

After seeing margin calls in my account so high they cannot be comprehended by the human brain, I sat through - crunching peanut-butter-smeared granola bars and chasing them with coffee - and watched the carnage subside.  Too proud to close a position for a loss just to avoid possible future damage, when I firmly (no, shakily) believed the damage would not become a reality, I sat there and tried to live on a steady diet of hope and lip-biting.  My belief was (still is, but it's moot now) that if the market bounced back fast enough, everyone would be amused by the idea of UVXY 55 and I'd be able to tell everyone the story of how I made 400 lousy dollars from the hardest trade in my life.

Instead, as my honest suspicions told me would happen, a second VIX spike happened today (August 25th) with UVXY following suit trying to get a senior discount at all the diners in town with its 65+ card.  $66.81 is the highest print I see today.

$16.90 is the highest price someone paid today to negotiate UVXY 55, expiring this Friday (the 28th) and it was done just before the close.  I don't have that kind of money to throw away, so thankfully I threw away just $5.95 earlier in the day (would have preferred the $2 range, but at least I didn't ruin my account.)  On 11 contracts, that's enough money to cause all-day grouchiness, especially since I still don't think UVXY will be at 55 on Friday, but to satisfy the brokerage which does not wish to ask their employees to mortgage their house to protect my account, I did it.  Because I am not working with play money, and must make good on the contracts I have written, I got out of a contract that I know deep down has the potential to cost me money my pockets are not deep enough to produce.  When your broker calls and says "we are watching this," it tends to nudge you to dispose of the miserable headache-causing mess.

Shouldn't I have hedged it?  Yeah - coulda, shoulda, woulda.

In addition to this I sold puts, both prior to the "corrective phase" and in the midst of it, for SVXY at prices people will laugh at me for during the foreseeable future.  So I will have a large pile of "stock" to work with, and how long my account total remains depressed due to it remains to be seen.  I'll sell the dickens out of calls, though, and make what money I can.

Prepare for some boring times on this blog (maybe.  You never know.  No one knows, or more people would be profiting like geniuses from current market conditions.  The genius count does not get added to by this writer.)

The bull market lives! Long live the bull market!

This post may also be read at: http://www.cboeoptionshub.com/2015/08/17/the-bull-market-lives-long-live-the-bull-market/

Or at least through the end of this week.  After that I'll be ready for anything else, but please - whatever is keeping volatility low - stay stable for a few more days.

My escapades this month started on August 3rd, when I thought I'd draw a line in the sand for UVXY.  See chart below. UVXY was in the $25 range that day and its fraternal twin VIX was in the low 12s. I calculated that UVXY was unlikely to sink as low as $24 during the next two weeks, and wrote puts at that strike for 93 cents.  Later in the day, those puts eroded in value to just 63 cents, and I could not pass up such a quick bargain, so I rang the register and put the proceeds right in the till.

Later in the afternoon, I looked for better premium on an even more attractive strike. After a jog around the park, UVXY took a solid nap, dropping back down to its morning levels, and I went searching for premium, this time deciding to be a little safer (since my estimates can be wrong).  I wanted to hold this one until expiration (that's usually my intent) and get more than just the icing off the cake, as I did earlier in the day.  So I chose a lower strike this time, $23.50, at the same expiration nearly two weeks away, and got a price very close to the one I had just paid to close the previous, more "dangerous" contracts.  I considered it basically a "free" move to a safer strike.  To make it seem like a deal even better than "nearly free," I wrote more contracts.  I wanted more money than I would have gotten had I just held the previous set of contracts, and I was willing to further my own willful delusion by taking on more risk (writing more contracts.)  At 63 cents each as payment, and taking on the risk of being assigned $28,000 worth of UVXY, I stood to make seven big bills for my time and trouble.

I could have held until expiration day to get every last penny out of the trade, but with two days to go, once again I could not pass up the bargain of closing the trade for just two cents when VIX did a one-day-only spike up into sixteen land.  UVXY startled itself up to $30 in sympathy, options traders got a case of the vapors, and someone left those contracts on the block for a price tag of just pennies, so I threw two pennies in that direction and left town twelve contracts lighter.  Subtracting commission, it turned out to be exactly the quoted figure: Seven sheets of double-digit currency.  So that was the end of my UVXY activity in August (so far - barring any new weird ideas I might get.)

Going back to the first week of August for an explanation of my motives:  While VIX languished around in the 12 range and no one had a foggy clue what SPX was going to do, I saw nothing to do but engage in the above hilarity plus accompanying chuckles called "selling SVXY calls."  Note that the below chart is, not coincidentally, pretty much a flipped version of the one above.  On August 4th I got it into my head to write 99 calls and someone else was handing out $2.20 to buy them.  I kept those under my hat all the way through today, when I decided that in the same way no one knows what SPX will do, there is no way in the dickens that SVXY can be counted on to do anything in particular for even the next five days, and I'd be willing to pay 20 cents per contract to get out of SVXY's way.  Pocketing a hefty "worrying fee," of course.  The worry coming from the way SVXY twice kissed $97 or thereabouts, right after I wrote those "take your chances" tickets.  Writing calls on SVXY always seems like more of a sweat-inducer than writing puts, if only because SVXY tends to march up the hill steadily with almost no encouragement under all but the most worrisome market conditions. 

Well, that's the wrap-up on my early-August attempt to get the leftover crumbs out of the pan where the great summer VIX cake was baked and served and all but forgotten about by now, with only some sagging volatility indexes left behind to make us wonder if it ever really happened.  Now, notice that so far these positions I opened and closed were designed to vindicate my thesis that volatility was not going to get much lower, or at least that the good-time party friends of VIX (my buddies UVXY and SVXY) could only go so much lower or so much higher (respectively).  That's a hard way to make money, though, when volatility is already low.  Around a week ago I shifted tactics, but didn't really shift sentiment.

Unless and until there's some sort of spike in volatility, I'll take the premium where I can find it, and I'll risk being forced to take on water if I have to.  Being paid a bonus to buy SVXY at prices not seen all summer other than during the July VIX bake-off is a worthwhile venture, in my estimation, and so is picking up bet money on the "do not cross" lines set at various points south of the current trading price.  On August 11th and 12th I wrote puts on $85, and then, balancing the likelihood of being assigned shares with the compensation I'd get for the inconvenience (of taking on nearly double the SVXY I'd be a proud owner of - I'd be a nervous owner if assigned all), I wrote a few more puts on $77.50.  Premium on the former was $1.65 per contract, and on the latter, a whopping (proportionally speaking) $1.45.  The reason the premium was so decent on the 77.50s is because anyone who comes along for the ride must chip in for gas.  No, really - as depicted by the blue arrows, I took advantage of an overnight share price drop to pick up the last few.  Follow along for a less wordy (because I've already explained it all) installation documenting the conclusion to this story pretty soon, as the story must end before the dates stamped on my only two current positions: Friday the 21st.